Vietnam Central Bank Lowers Credit Growth Target to 15%

Vietnam’s central bank has revised its credit growth target for 2024 to approximately 15 percent, responding to concerns about financial risks following a surge in credit last year. This adjustment, announced on January 10, 2024, comes after the country experienced rapid credit growth of around 20 percent in 2023, as authorities aimed to stimulate economic expansion.

The State Bank of Vietnam stated that its new target serves as both a guideline and a ceiling for lenders. This marks a decrease from the previously set target of 16 percent for 2025, which was raised during the past year. The central bank did not reveal the adjusted target for last year’s growth, leaving some uncertainty regarding the overall credit landscape.

Market Reactions and Economic Implications

Economists have raised alarms about potential price bubbles in various sectors, particularly real estate, prompting the bank to call for tighter controls on loans to high-risk areas. In a statement, Willie Tanioto, a senior analyst at Fitch Ratings, remarked, “In our view, the State Bank of Vietnam has tried to be receptive to market feedback.” He also indicated that the credit target might be adjusted again later in the year, depending on economic conditions.

Following the announcement of the revised target, shares of several real estate companies took a hit. Notably, shares of Vinhomes, Vietnam’s largest property firm, fell by 6.4 percent on the morning of January 12. The overall real estate sector declined by approximately 5 percent, reflecting investor concerns about the central bank’s new policy direction.

Future Outlook

The central bank’s proactive measures aim to mitigate risks associated with excessive credit growth. By tightening lending practices, particularly in the real estate market, officials hope to stabilize the financial system. As the year progresses, market participants will closely monitor any further adjustments to the credit growth targets, which could significantly impact both the banking sector and the broader economy.

In this environment, the balance between fostering economic growth and ensuring financial stability remains crucial for Vietnam’s economic trajectory. The State Bank of Vietnam is expected to continue assessing market conditions as it navigates the challenges ahead.